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Russia ready to give struggling Cyprus more money

Russia could provide support to Cyprus but the island state itself and the European Union must take the biggest share of a bailout, Russian Prime Minister Dmitry Medvedev has told a German newspaper.

The Mediterranean island, waiting for a multi-billion euro bailout after heavy exposure to debt-crippled Greece, has had to contend with misgivings from lender states on how committed it is to fighting money laundering and why the island is a magnet for Russian money.

Cyprus offers the eurozone's lowest nominal corporate tax rate and has had close political ties with Russia for decades.

"We think the main burden to solve these problems should be taken on by Cyprus and the EU states," Medvedev said in an interview with the German business daily Handelsblatt on Monday (28 January).

"But we are not refusing to help under certain conditions. The conditions must be agreed first. Before that, there can be no money from us," he added, adding that Russia had already given Cyprus a €2.5 billion loan in 2011.

Cyprus sought a bailout from the EU and the IMF last year, but aid has stalled as they assess the precise capital requirements of its banking system and whether the government may have to sell state assets to ensure the bailout is not too onerous to be paid back.

The incumbent government is against asset disposals but presidential elections will be held in mid-February.

Background

Cyprus, which joined the EU in 2004 and became a eurozone member in 2008, held the EU presidency in the second half of 2012.

The entire island of Cyprus is officially EU territory, but the country is divided. Turkey, an EU candidate, doesn’t recognise the Republic of Cyprus and has occupied the northern part of the island since 1974.

Cyprus is heavily exposed to the Greek crisis and needs to salvage its banking system, which in recent years has become a haven for rich Russians.